Archive for April, 2009

Chrysler intros a new SUV … these guys have stones!

April 8, 2009

Ken’s Take:

(1) Team Obama says folks want Segway crossover hybreds (see yesterday’s post); but the folks say they want pick-ups and SUVs.  Apparently the folks are too dumb to know what they want … but, they’re allowed to vote.  Go figure.

(2) How dumb is Chrysler making cars that make money instead of ones that lose money … apparently the path to profitability is paved with unprofitable mini-cars.  Go figure that one, too.

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According to CNBC:

Just a week after the White House scolded Chrysler for relying too much on gas guzzlers, the company is unveiling a new SUV.

Chrysler insists the Jeep Grand Cherokee is a crowd favorite: “Customers have told us they want this vehicle and that it’s the right size.”

The White House slammed Chrysler for having a product lineup so heavily weighted with trucks and SUVs. It added that the automaker does not have enough products in the pipeline to meet an expected increase in demand for small cars.

But Chrysler is standing by the Grand Cherokee. It’s profitable, recognizable and the No. 2-selling vehicle in the Jeep lineup. Grand Cherokee

One analyst said: “I think it’s going to be written up as being out of touch, but from a business standpoint, I think it’s the right thing to be doing,”

“It may be hard for Chrysler to please both the government, which is demanding greater fuel efficiency from the Big Three, and its customers, many of whom still demand big cars. It would be far more foolish for Chrysler to abandon its core competencies in the Jeep brand lineup than it is to come out with a new” Grand Cherokee” 

“To some extent, it’s refreshing to me to see them not kowtowing to the government.”

Full article:
http://www.cnbc.com/id/30103625

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From Bad to Worse: New Competitors for Struggling Sirius

April 8, 2009

Excerpted from BusinessWeek, “Serious Threats to Sirius Radio”, by Olga Kharif, March 30, 2009

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Since its inception, satellite radio bragged that unique content represented a key competitive weapon in the crowded digital media market. Just last year, former rivals Sirius and XM spent a combined $446.6 million on programming and content alone. But as Web radio and mobile radio applications flourish, they are beginning to erode the value of Sirius’s pricey content deals.

Companies like the Web radio service Pandora, Foneshow, Stitcher, and Slacker—as well as traditional content providers—are broadcasting portable and mobile content that is cheaper or even free. Moreover, these upstarts can often replicate Sirius programming. One example: On Mar. 30, MLB will release an iPhone mobile application that will stream games live from all 30 teams—which is what Sirius customers get now—and offer video clips and live score updates for $10 for the entire season.

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For Sirius XM, this competition over price and content comes at the worst possible time. The company is looking to monetize its content through mobile phones to complement its traditional outlets. Auto sales, which have fueled Sirius’s subscriber growth for several years, have slowed to a crawl. Ditto for retail store sales now that electronics retailer Circuit City is gone. Even worse, many consumers have slammed their wallets shut amid the recession.

Now, new rivals are making Sirius look overpriced and stodgy.  To find growth, New York-based Sirius must change from a satellite radio company into one that offers pure content through new distribution channels, such as mobile.

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In its latest quarter, Sirius added a net 82,945 subscribers—down from 1.1 million in the same quarter of 2007. Growth could pick up if the radio service were to be bundled with Liberty Media-owned DirecTV. The two satellite companies could also cross-market to each other’s subscribers. Liberty, which has a 40% stake that is convertible to Sirius XM shares, is also working with the company on a business plan aimed at cutting costs, such as Sirius’s talent fees.

Still, it’s hard to fathom Stern taking a huge pay cut when his Sirius XM contract expires at the end of 2010. He has said he may retire then, but he also may shop around for a better offer if Sirius decides not to pay. Stern contributed roughly 2 million of Sirius XM’s 19 million subscribers. While a near-10% customer base is worth plenty, Sirius may well decide it is not worth $100 million annually.

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The New Competition:

Some of Sirius’ 69 music channels have already been replicated online. As much as 40% of Slacker’s 1 million monthly listeners come from mobiles. The service is free for those willing to listen to 30 seconds to two minutes of advertising per hour. For $3.99 a month, Slacker has no ads and allows song skipping.

iPhone users can now listen to talk shows through a service called Stitcher, which grabs RSS feeds from online podcasts and allows users to “stitch” together custom radio channels of popular news and talk shows. Stitcher users listen to 5 million minutes of radio a month, up from 1 million last August, and is on track to reach 1 million users by the end of 2009.

Foneshow lets any phone with text messaging capabilities to catch custom talk radio programming.  Whenever a new show segment becomes available, your phone receives a short text message with a link. You hit “Send,” and your phone starts streaming audio, which you can pause, skip or forward to a friend.

This summer, Myine Electronics, begun by two former satellite radio hardware engineers, will launch a device called Abbee. The $250 gadget scans FM stations and records songs onto an internal hard drive while erasing all commercials. The gadget has a cable for use in a car, the domain of satellite radio.

Edit by DAF

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Full article:
http://www.businessweek.com/print/technology/content/mar2009/tc20090327_877363.htm

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Why Zara Stays Strong as Other Retailers Slip

April 8, 2009

Excerpted from WSJ, “Zara Grows as Retail Rivals Struggle” By Cecilie Rohwedder, Mar 26, 2009

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Defying the recession with its cheap-and-chic Zara clothing chain, Spanish retailer Inditex SA posted strong sales gains that show how low prices and a rapid response to fashion trends are enabling it to challenge Gap for top ranking among global clothing vendors.

The improved results highlight how Zara’s formula continues to work even in the economic downturn. The chain specializes in lightning-quick turnarounds of the latest designer trends at prices tailored to the young — about $27 an item.

While apparel chains in the U.S., Europe and Asia are struggling and closing stores, Inditex reported a 10% sales gain and higher gross margin, which already exceeds many rivals. A fast logistics system allows it to get clothes from drawing boards to stores in less than two weeks, compared with an industry average of nine months. Its lean inventory and fast shipments allow it to avoid profit-damaging markdowns.

Revenue hit €10.41 billion ($14 billion) for the fiscal year … up from €9.44 billion in 2007. Annual profit was flat at €1.25 billion, but the company said it expects same-store sales to increase this year. The company’s gross margin rose slightly to 56.8%, reflecting the lean inventories.

In contrast, San Francisco-based Gap, the largest independent clothing retailer by revenue, last month posted a 23% decline in full-year sales … It plans a modest 50 new stores this fiscal year. Gap’s gross margin rose, but to 37.5% …

In recent years, Inditex has become known as a low-priced alternative to designer boutiques. Zara stores sit on some of the world’s glitziest shopping streets — including New York’s Fifth Avenue, near the flagship stores of leading international fashion brands — which make its moderate prices stand out.

“Inditex gives people the most up-to-date fashion at accessible prices, so it is a real alternative to high-end fashion lines … Gap, Benetton and others haven’t been alternatives because they sell more basic styles.”

The chain keeps profits high by avoiding advertising and by building a low-cost perception. That is helping as shoppers trade down from higher priced chains … While competitors are resorting to deep discounting, Inditex isn’t. “We prefer to stick to our commercial policy even in the current environment,” said Marcos Lopez, capital-markets director at Inditex … “The key driver in our stores is the right fashion. Price is important, but it comes second.”

In the short term, Inditex must still weather the uncertainty over how long and how deep the economic slowdown will be in Spain and Western Europe, which together make up 79% of its sales.

Edit by SAC

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Full Article:
http://online.wsj.com/article/SB123801606310041287.html

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Turning around the economy on a dollar-a-day …

April 7, 2009

Well, the “middle class tax cut for 95% of workers” has officially started hitting paychecks.

So, if you work but earn less than a couple of hundred grand per year, your paycheck is now about a buck-a-day higher — the $400 tax rebate spread across 365 days.

For perspective, the total stimulus bill was about $800 billion.  The Congressional Budget office estimates that about 1/4 of it  (~ $200 billion) will hit in the first year.  The $400 program is about 1/2 of the $200 billion.

In other words, about half of this year’s stimulus is in place. Yipes.

I hope you’re feeling better about this plan than I am.

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Finally GM "gets it" … an Obamamobile !

April 7, 2009

Part of GM’s viability plan, I guess …

Hitting the news today, GM is joint venturing with  Segway to develop a clean, all electric urban vehicle.  Reportedly, it can go 35 miles on each charge.

At last, a vehicle less safe than a Smart car.

Question: how long do you think it takes for a person to get feeling back in his / her butt after traveling a few miles in this joke machine ?

Just shoot me, please.

image

http://online.wsj.com/article/SB123906731177395605.html#mod=testMod

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Japan Jumps Ahead: The Honda/Toyota Hybrid War Leaves Detroit Playing Catch-Up

April 7, 2009

Excerpted from BusinessWeek, “Toyota, Honda Heat Up the Hybrid War”, by Ian Rowley, March 27, 2009

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Honda and Toyota are launching hybrid cars in quick succession—and neither one is skimping when it comes to generating hype. The Honda Insight boasts a sub-$20,000 sticker price, fuel economy of 40 miles per gallon in the city and 43 mpg on the highway, and is arguably more fun to drive. The latest Toyota Prius is larger than its Honda rival, gets better mileage, and (unlike the Insight) has an EV mode, where the driver instructs the car via the touch of a button to run solely on battery power. However, the soon-to-be-released Prius is expected to be more expensive, with a U.S. sticker price starting at around $23,000.

Toyota is also planning a smaller, cheaper hybrid based on its Yaris platform to take on the Insight. “We are going to compete by expanding our hybrid vehicle lineup to smaller hybrids.”

Toyota is also taking the unusual step of selling a cheaper version of the current Prius alongside the new one. “There will be demand for the two to co-exist,” Toyota said at the unveiling of the new car for the Japanese market. This cheaper Prius, like the Insight, will go on sale in Japan for less than $20,000.

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Analysts question, however, the impact of launching a cheap version of the old Prius alongside the new one. They worry the older Prius may eat into sales of the new Prius and similar-sized models such as the Corolla, or that it might force Toyota to cut prices of nonhybrid models.

The new Prius may go on sale in Japan for as little as $20,900, which would be $3,000 cheaper than the current model—even though the new Prius has a larger engine and is more luxurious.

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It is feasible, though, that both companies can win the hybrid war. For one thing, the rivalry is helping to bring the “hybrid premium”—the incremental cost of making hybrids compared with regular vehicles—down to levels where owning is as much about economic sense as sending an “I’m green” message.

Improved production efficiency is just as important. Honda can now make 250,000 hybrid cars a year at its Suzuka plant. Increased scale is making it easier to bring down costs. The company increased the number of workers assembling battery modules from 20 to 54. But by increasing automation, Honda now has the capacity to produce 1,000 packs a day, vs. about 250 before the Insight went into production.

At Toyota, engineers didn’t quite manage to reduce the size and cost of the Prius’ new-generation hybrid system by half, but both have been reduced by 25% to 35%, compared with the current second-generation model.

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In a deep recession, meeting sales targets will be tough for both companies. Still, even if sales disappoint, the new models will help the two Japanese companies maintain their dominant market share in hybrids. Although rivals are launching more gas-electric vehicles, no other automaker is yet close to producing hybrids in the hundreds of thousands.

Edit by DAF

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Full article:
http://www.businessweek.com/print/globalbiz/content/mar2009/gb20090327_626019.htm

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Will Sex Sell Sandwiches? Quiznos’ Edgy Campaign Sparks a Price War

April 7, 2009

Excerpted from Ad Age, “Quiznos Throws Subway Curve With ‘Sexy’ $4 Foot-Long” By Emily Bryson York, March 23, 2009

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Seeking to return to its identity as an edgy upstart, Quiznos is undercutting rival Subway’s $5 foot-long with a $4 version called the Toasty Torpedo, pitched as a product with “12 inches of flavor” by a smoky-voiced toaster that asks a chef to “Say it sexy” and “Put it in me.”

It’s the latest attention-grabbing bid by the nation’s second-largest sandwich chain, which has struggled in recent years because of problems with franchisee profitability and the perception that the food is expensive … “The reality is that we are a challenger brand,” CMO Rebecca Steinfort said … “Our main competition is Subway, which is an 800-pound gorilla. We may be 200 pounds, but they’re 800.”

Quiznos built a following with toasted, high-quality subs and envelope-pushing marketing … While the recession hit Quiznos hard, rival Subway has gone gangbusters with its $5-foot-long promotion, which helped to fuel double-digit increases in same-store sales. At Quiznos, marketing failed to drive traffic and closed stores …

Creative aside, the $4 price point might just be a magic bullet for Quiznos, undercutting its rival in a recessionary market where every dollar counts for consumers. “I think the right price point is very important in the sandwich business,” said Dennis Lombardi, exec VP-food service strategies … Subway’s foot-long “changed the paradigm. So the trick now is: How do you create a product that counters that? And a $4 sandwich sounds like a good start.”

Earlier this year, Quiznos revamped its menu to reduce prices and come closer to the critical $5 mark … This month, Quiznos offered a “Million Sub Giveaway” … While the promotion was an overwhelming success in terms of data collection, a few problems ensued. Quiznos had 1 million e-mails within three days, but some consumers didn’t get their coupons, and others couldn’t print them. A few flustered franchisees turned coupon holders away.

Mr. Lombardi said Quiznos will have to be careful of the promotions it uses to survive the recession, but “it’s much easier to go from premium product to bargain product than it is to go from bargain product to premium product” …

Ms. Steinfort said the chain’s recent marketing efforts have already begun to pay off. Quiznos’ consumer research shows that most customers come into Quiznos and notice the prices are lower, and 70% say they plan to come back. She described the results as being “significantly better,” or showing “hockey-stick-type improvement” over last year, when the chain’s prices were on the rise.

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135435

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Outlook is Optimistic for Marketers’ Job Security

April 7, 2009

Excerpted from Brandweek, “Marketers Expect to Keep Jobs, Budgets” By Kenneth Hein, March 14, 2009

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While many reports suggest the sky is falling for marketers, a large number of top-level executives feel that their jobs and much of their staff’s jobs are safe. What’s more, the majority do not anticipate cutting their marketing budgets.

The CMO Council interviewed 659 global senior marketers online between mid-January and March 2. Overall, it found that marketers are not planning major restructuring, head-count reductions or wholesale agency terminations this year.

More than half do not feel their jobs are at risk and 20.6% simply are not sure. More than a third plan to keep their teams intact and 26% expect to add staff.

“There was not as much panic about job security that we thought there would be,” said Liz Miller, vp, programs and operations at the CMO Council. “The big story for the marketing community is it is not about budget slashing; it’s about budget reallocation. Marketers are looking to better support the sales team, drive business growth and engage the individual customer” …

“It’s not about window dressing this year … Marketers need to stop looking at how to refresh our brand, change our logo or what we mean to consumers. This year they don’t have the millions to do that. It’s how do you do it faster, better and more efficiently with less cash to waste on things that don’t work. You need to better support your sales team because they need leads, that’s the bottom line” …

Marketers top marching orders from their bosses are: Growing and retaining market share (48%), lowering costs and improving efficiencies (44%) and improving customer insight and retention (33%).

The top factors affecting marketers are customer anxiety and cutbacks (49%) and slower, more complex selling cycles (38%). The top frustrations were: Insufficient budget (43%), the organizational culture (37%) and senior management mindset (33%).

Overall, “We’re coming out of a long phase where the wind was in our favor … When they are in your favor you don’t need to be particularly smart to be somewhat successful. In these conditions, you need to be a lot smarter than before.”

Edit by SAC

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/direct/e3idd9d6803dbe30862f19d9fb07e5dfbca

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What’s up with the President’s approval ratings ?

April 6, 2009

Excerpted from Rasmussen Reports, Friday, April 03, 2009

Most media reports say that the President has sky high approval rating.  But …

According to the Rasmussen Daily Presidential Tracking Poll,  35% of the nation’s voters now Strongly Approve of the way that Barack Obama is performing his role as President …  32% Strongly Disapprove … That gives Obama a Presidential Approval Index rating of +3, his lowest rating to date

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While the President is maintaining his rockhard support among African Americans, more non-African Americans Strongly Disapprove (35%) of the way he is performing as President than Strongly Approve (28%) … giving him a negative PAI (-7) with that group.

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Cap & Trade … and you think mortgage-backed derivatives were risky

April 6, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

The essence of cap and trade:

Congress puts a ceiling on emissions, and then allows businesses to sell any of its extra allowances that stand for the right to emit, it is essentially creating the world’s largest commodity market — in carbon-backed securities. These will be extremely valuable, and everything comes down to how the government chooses to distribute them. ”

Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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Ken’s Take: Think about it … a financial derivative tied to the amount of carbon that an energy generating facility doesn’t emit.  At least mortgage backed securities were, well, backed by mortgages — albeit risky ones.  These derivatives would be backed by, well, nothing, except a Congressional definition that could change at Barney Frank’s whim.  You’d think that Enron and the current financial mess would have soured folks on those sorts of financial instruments.

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Coke’s Challenger Brand Hopes to Power over Gatorade

April 6, 2009

Excerpted from Ad Age, “Gator Baiter: Powerade Jabs at Powerhouse,” By Natalie Zmuda, Mar 23, 2009

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The billboard shows the vertical half of what appears to be a Gatorade bottle on one side, with the other side open to the bare blue sky. But what might at first be taken for a mistake is explained by the text: “Don’t settle for an incomplete sports drink.” A few feet down the road perches another billboard, this one showing a fully intact bottle of Powerade. It’s tagged: “The complete sports drink.”

It’s a classic challenger strategy, except it comes from one of the world’s biggest marketers, Coca-Cola Co. The company might be a giant when it comes to soda, but in sports drinks, Coke’s Powerade runs in the shadow of PepsiCo’s Gatorade. So in true competitive fashion, the smaller rival is undertaking a bold and innovative print and outdoor effort that positions the category leader as only half the brand Powerade is.

Powerade’s plan is to blitz the market with messaging that Gatorade is an inferior method of hydration, and says it has the science to back it up. Since early last year, Powerade has been in the lab reformulating its trademark sports drink to include four electrolytes — sodium, potassium, calcium and magnesium — lost during exercise. Gatorade’s formula contains just two electrolytes, sodium and potassium

To get its message across, Powerade … developed a clever comparative campaign that pits the brand against PepsiCo’s Gatorade. “They’re the lion in the category, and we wanted to compare what our drink does for you vs. the competition,” Mr. Kahn said. “People associate [Gatorade] with the category. When you’re another brand competing, you want to make sure to give people a point of difference.”

Powerade also … will take over the cover of ESPN The Magazine, marking the first time the publication has mingled editorial properties with advertising on its cover. It will feature a blank flap obscuring half of the cover image but retaining the magazine title. The front of the flap states, “You wouldn’t want an incomplete cover.” And the back of the flap shows half a Gatorade bottle with the text, “Don’t settle for an incomplete sports drink.” Powerade is then held up as the “complete sports drink” on the inside of the front cover …

According to Beverage Digest, Powerade controls 22% of the sports-drink market, while Gatorade has a 77% share … For its part, Gatorade is shrugging off the attack, maintaining that all Powerade has done is create a spinoff of its Gatorade Endurance Formula, developed in 2004 …

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Full Article:
http://adage.com/article?article_id=135436

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Automakers Promote A New Breed of Pony Cars … on the cheap, of course.

April 6, 2009

Excerpted from Ad Age, “How to Get Consumers to Pony up for Pony Cars? With Little Advertising” By Jean Halliday, March 26, 2009

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Question: How do you launch a big ad campaign for sexy sports car in the teeth of a recession? Answer: You don’t.

The pony car is back, as each of Detroit’s three carmakers revs up an entry in the segment for the first time in decades. General Motors is bringing back the Chevrolet Camaro, which it discontinued in 2002; Chrysler revived the Dodge Challenger last fall after a nearly 35-year absence … and Ford, which started the pony-car craze in 1964 with the Mustang, launches the newest version of the coupe in April.

Although the redone versions of the classic cars are getting good reviews from auto-buff books and car enthusiasts … the timing is awful as the industry tries to pull out of its worst sales year in decades. As a result, there won’t be high-profile national TV blitzes for the cars from Chevy or Dodge, which will rely more on nontraditional media.

Chevrolet, which started shipping the 2010-model Camaro to dealerships this week, activated a new microsite for the car … Much of the Camaro’s launch will be online … In addition, Chevrolet will back the new Camaro in co-branded ads for the movie “Transformer: Revenge of the Fallen” …

Ford teamed with the nonprofit Mustang Club of America for a long weekend of events in Birmingham, Ala., to celebrate the 45th anniversary of the pony car … Ford Racing also linked up with Miller Motorsports Park to develop a new racing series with Mustangs that will kick off there, complimented by a street party, a driving cruise for Mustang owners and a banquet …

Mike Accavitti, director-Dodge marketing, said the … there are no dedicated ads for the [Challenger]. He said the automaker plans to keep the car fresh by introducing special, limited-edition colors or racing-stripe packages … He figures the Challenger will get a boost from consumers also shopping for the Camaro. He doesn’t expect Chevrolet to bite into Challenger sales, at least for the first two months it’s on sale, because loyal Camaro fans will be the early buyers. “We’ll see a battleground after that … After 35 years, the three pony cars are back” …

U.S. sales across the entire mid-size sporty coupe segment last year only tallied 150,000 units … That compares to some 575,000 units sold in 1995, or 3.9% of all vehicles sold that year. J.D. Power projects the tally for the coupe category next year will total just more than 200,000 units, or 1.7% of all new vehicles sold.

“There’s been a shift in consumers’ taste, so the larger, sporty, two-door vehicles have fallen out of favor … But these two models are more practical than their predecessors.”

Practical maybe, but not inexpensive. The 2010 Camaro starts at $22,995 and the 2010 Mustang at $20,995, but the latter’s performance GT500 convertible version starts at $51,225. The Challenger starts at $22,545 but the souped-up R/T Classic version that went on sale early this year starts at $34,005.

Edit by SAC

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Full Article:
http://adage.com/article?article_id=135580

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Cap & Trade … if it smells like a tax …

April 3, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009 

Ken’s Take: The Bushers were clever rebranding the estate tax as the more pejorative sounding “death tax”.  Team Obama is similarly clever calling their energy tax “cap and trade”.  Doesn’t change the essence — it’s a tax.

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On pure economic grounds, a straight carbon tax, would be simpler and more efficient than cap and trade.

But “the political will to go the tax route . . . is just not there. Nonexistent” — namely because the use of the word “tax.”

The cap & trade approach is to design a  program that will “simulate the same thing a tax would do.”

That is, to achieve the increased energy prices essential to the success of cap and trade.

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Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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Skype Steps Into Business Seeking New Sources of Revenue

April 3, 2009

Excerpted from WSJ, “Skype Targets Businesses to Ring Up New Revenue” By Geoffrey Fowler, Mar 23, 2009 

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EBay’s Skype Internet phone unit, on the hunt for new sources of revenue, is making a push into the corporate market.

Skype plans to announce a version of its Internet calling software that connects to corporate phone systems. The new software is expected to allow employees to make domestic and international calls using regular office telephones, instead of a headset plugged into a personal computer. Initially, the company will charge about 2.1 cents per minute for calls to cellphones and fixed lines, but calls from computers to phone systems using the Skype software will be free, similar to what it now charges for its consumer service.

The company is known for allowing users to make free voice and video calls between computers, using a technology called VOIP, for voice over Internet protocol. Though the majority of users are consumers, the company says about 35% of its customers already use the service for business purposes.

Now the company is hoping to appeal more directly to small and medium-sized businesses, which may be particularly receptive to lowering their phone bills during the recession … Its new product is called Skype for SIP. The acronym stands for Session Initiation Protocol, a technology used by many business phone networks …

Skype’s announcement comes as parent company eBay — which bought Skype for $2.6 billion in cash and stock in 2005 — faces pressure from investors to make more money from Skype or sell it. The company brought in $550 million in revenue last year, mostly from services such as paid calls to regular phone lines and voicemail.

Its new effort faces plenty of competition in what some analysts estimate is a $200 billion business communications market … Skype argues that its 405 million users give it a leg up in the business market. It points to customers like Steve Mandel, founder of a management training and consulting company, who says his 65 employees use Skype to keep in touch with each other and with clients. “If Skype didn’t exist, our phone bills would be I’m guessing 50% to 100% higher than they are now,” he said.

Skype has been controversial with some technology managers. Though the service seems to be free … mitigating potential security risks posed by the software, since it involves the Internet and often requires software updates, “involves operational and support costs.” Skype insists that its software is secure, and has developed tools to make sure all the computers at a company are using the same version of its program.

As part of the move to attract business users, the company is trying to change its image — including its logo, which used to feature a guitar and rainbow. “Customers told us, ‘How can we take you seriously when you look like an Abba album from 1976?'” said Mr. Oberg. “A lot of the features that we have sold to consumers in a certain way need to be sold to business in another way.”

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Full Article:
http://online.wsj.com/article_email/SB123776338990608661-lMyQjAxMDI5MzI3MzcyNjMzWj.html

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Cap & Trade … the Chinese dilemma

April 2, 2009

Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

With breakneck construction of conventional coal plants, China has already surpassed U.S. coal capacity and is on pace to double it sometime in the middle of the next decade.

The U.S.,could close down every single coal plant immediately … but that wouldn’t do much good in the scheme of things,” because atmospheric CO2 concentrations would continue to rise as China continues to expand.

“We go to zero emissions in this country, and if China doesn’t follow us, we’re nowhere. . . . We’ve just ruined our economy, and we’re nowhere,”

China’s not going to follow us because we’re the United States. . . . You say, ‘Shut down your plants’ — well, that’s going to be a short conversation. China has $2 trillion invested in their plants.” 

Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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The key to fighting private label…innovation

April 2, 2009

Excerpted from Reuters, “Foodmakers tout innovation to battle imitation” by Nicole Maestri, March 19, 2009

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If imitation is the best form of flattery, foodmakers are finding themselves dealing with an inordinate number of compliments these days.

As the recession crimps household budgets, retailers like Wal-Mart  and Target are increasingly looking to woo shoppers with their own private label, or store brand, food items that often look very similar to name brand products but are sold at lower prices.

Foodmakers are defending their turf … they say that they are the ones who develop innovative new products and spend marketing dollars to draw shoppers into retailers’ stores.

They acknowledge that retailers are giving them a run for their money, introducing better products at a faster pace and squeezing out tertiary brands in the process… Seeking to woo frugal shoppers, retailers are giving more shelf space to their own brands and stepping up promotions… The question now looms as to whether retailers will make the leap from simply imitating name brand foods to innovating on their own.

“The entire retail trade has become energized very quickly to bring out products that compete with branded package food,” 

Wal-Mart is relaunching its Great Value private brand, adding more than 80 new products, like double-stuffed sandwich cookies and organic cage-free eggs.

Consumers really take notice of private label products when the price gap between a name brand item and a store brand one reaches more than 30 percent.

Cexclusively on price is potentially a good short-term tactic, but long-term you really want to build your brand and what it stands for in consumers’ minds.”

If you introduce a new product, no one really knows what the price of that product should be,” he said. That allows foodmakers to set an initial price and build in a hefty margin before imitators come into the space, he said. It can also help sell higher-priced items amid a recession.

Unilever’s Bertolli frozen dinners, which are marketed as “restaurant quality.” While they may be more expensive than other frozen dinners, they are priced “at about a 40 percent value to take-out food or restaurant food.”

Shoppers feel like they are getting a deal when they buy Bertolli because they spent less than they would have in a restaurant, even though the meals are more expensive than other items in the frozen food aisle.

With retailers increasingly eyeing private label, it has become crucial for foodmakers to make sure they have the No. 1 or No. 2 brand in their categories. Brands that cannot distinguish themselves face losing shelf space.

“I wouldn’t want to be a number three, four or five brand that wasn’t differentiated.”

While the recession may create chaos as retailers and foodmakers compete for thrifty shoppers, it remains to be seen if private label can keep its allure once the tough times recede.

“As we get out of this recession, will consumers then look back to their favorite brand or not?”

Edit by NRV

Full article: http://www.reuters.com/article/ousiv/idUSTRE52I5P420090319?sp=true

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KFC filling potholes … with chicken ?

April 2, 2009

Excerpted from Brandweek, “KFC Offers to Fill Up the Nation’s … Potholes” By Kenneth Hein, March 25, 2009

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Kentucky Fried Chicken today announced its own urban renewal program. The chicken chain has offered to fill up the potholes in five major U.S. cities to promote its “fresh” brand positioning.

Giving back has become a trend for marketers, including Starbucks, Kellogg’s Frosted Flakes and others that have centered their message around helping the community.

KFC sent a letter to U.S. mayors today asking them to nominate their cities’ roads to be refreshed. Every pothole filled by the fast feeder will be covered in nonpermanent street chalk with the words “Re-freshed by KFC.”

Jason Vargas of the experiential marketing agency Marketing Werks applauded the effort: “That’s street marketing at its finest. It’s a cool way of breaking through the clutter and building buzz.”

The guerilla/community service effort touts the fact that the chain uses only fresh chicken shipped in weekly. The chain’s head marketer Javier Benito, said in a statement, that this is “a perfect example of that rare and optimal occurrence when a company can creatively market itself and help local governments and everyday Americans across the country.” The chain estimates there are roughly 350 million potholes in the U.S. …

Not everyone is enthused about the publicity stunt. “There is an aggressiveness towards moving into new dimensions of public spaces. This would be another example of this unfortunate incursion of advertising messaging into [consumers’ lives],” said Robert Weissman, director of Commercial Alert. “KFC should fix their menu first.”

KFC’s 2008 U.S. sales were off about 1% at an estimated 5.1 billion … It spent $291 million on U.S. media last year, excluding online, per Nielsen Monitor-Plus.

Edit by SAC

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Full Article:
http://www.brandweek.com/bw/content_display/news-and-features/retail-restaurants/e3ic48b7a3a3eb3111d1e753e41e824f324?imw=Y

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Cap & Trade … the Nuclear Dilemma

April 1, 2009

Factoid: 79% of France’s electricity is nuclear generated.

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Excerpted from WSJ, “The Carbon Cap Dilemma”, March 28, 2009

On the one hand, environmentalists claim that climate change is a “planetary emergency,” perhaps the greatest threat ever to face humanity. On the other, nuclear energy is still verboten in the green catechism — despite the fact that it provides roughly one-fifth of U.S. electricity, all of it free of carbon emissions. Without more nuclear power, it is nearly impossible to see even the glimmers of any low-emission future.

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A lot of companies stand to make a bundle off cap and trade.

Ironically, the nuclear industry stands to benefit as much as any “green” business from a carbon crackdown.

So, if Congress does create cap and trade, expect the next populist outcry to be for a windfall profits tax on nuclear.

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Ken’s Take: … and don’t expect any more nuclear power plants to be brought on line.

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Full article:
http://online.wsj.com/article/SB123819777143661833.html#articleTabs%3Darticle

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Money’s important … time is dear.

April 1, 2009

Excerpted from Stanford GSB News, “Focus on Time Sells More Products” by Cassie Mogilner and Jennifer Aaker, March 2009

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“It’s Miller Time.” “Live Richly.” What do these vastly different marketing campaigns—one selling beer, the other financial services—have in common? They both focus on experiencing, rather than possessing, products… both are vastly more effective campaigns as a result.

“Because a person’s experience with a product tends to foster feelings of personal connection with it, referring to time typically leads to more favorable attitudes—and to more purchases,” says Jennifer Aaker, the General Atlantic Professor of Marketing at Stanford Graduate School of Business.

Very little research has been done on whether the focus on time actually changes consumers’ purchasing decisions or overall satisfaction with what they buy. Mogilner and Aaker hypothesized that marketers themselves weren’t aware of the value of stressing time. “What our work contributes is that they can trigger very different attitudes and behaviors just by mentioning time rather than money.” she says.

One explanation is that our relationship with time is much more personal than our relationship with money. “Ultimately, time is a more scarce resource—once it’s gone, it’s gone—and therefore more meaningful to us,” says Mogilner. “How we spend our time says so much more about who we are than does how we spend our money.”

Previous research had demonstrated that mentioning money makes people more self-sufficient, physically withdrawn, and less likely to help others. “On the other hand, when you refer to time, there’s a big social component that integrates the products you use with the people in your life, which makes the product experience more meaningful and richer,” says Mogilner.

In their first experiment the authors set up a lemonade stand—operated by two six-year olds, to make it appear authentic—for which they used three different signs. The first sign read “Spend a little time and enjoy C&D’s lemonade”; the second one, “Spend a little money, and enjoy C&D’s lemonade”; and the third, neutral one said simply, “Enjoy C&D’s lemonade.” Only one of the signs was displayed at a time. Customers were told they could pay between $1 and $3 for a cup of lemonade; the exact amount was up to them. After they made their purchase, they were surveyed to determine their attitude toward the lemonade.

The results were instructive: The sign stressing time attracted twice as many passersby—who were willing to pay almost twice as much—than when the money sign was displayed.

In a second experiment college students who owned iPods were either asked: “How much time have you spent on your iPod?” or “How much money have you spent on your iPod?” Students asked about time reported more favorable attitudes toward their iPods than those asked about money. “We were very surprised at how strong the differences were,” says Aaker.

But Mogilner and Aaker were interested in investigating even more complex ramifications of the time-money relationship. One theory is that references to money will always be negative because consumers are reminded of the cost of acquiring a product rather than the pleasure of consuming it. To explore this possibility, Aaker and Mogilner surveyed attendees at an outdoor music concert in San Francisco. Although the concert itself was free, people had to wait in line for long periods of time to get decent seats. Aaker and Mogilner asked random individuals: “How much time will you have spent to see the concert today?” or “How much money will you have spent to see the concert today?” Even in cases where the real cost of the product was time rather than money, asking specifically about time increased participants’ favorable attitudes toward the concert.

Even more strikingly, people who stood in line longer—who actually incurred a higher cost in terms of time spent—rated their satisfaction with the concert higher. “Even though waiting is presumably a bad thing, it somehow made people concentrate on the overall experience,” says Aaker.

The exception to all this: When marketing products that consumers buy for prestige value, stressing money spent seems to be more effective. Designer jeans, expensive jewelry, and high-status cars all fall into this category. “With such ‘prestige’ purchases, consumers feel that possessing the products reflect important aspects of themselves, and get more satisfaction from merely owning the product rather than spending time with it,” says Mogilner.  

Edit by NRV

Full article: http://www.gsb.stanford.edu/news/research/aaker_time.html?tr=research

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"Don't touch my jug" … Tropicana cans new packaging

April 1, 2009

Excerpted from brandchannel.com, “Packaging: Lessons from Tropicana’s Fruitless Design” by Jennifer Gidman, March 16, 2009

* * * * *

It’s a revamp-gone-wrong tale that has already secured its place in the annals of packaging: PepsiCo retains Arnell Group to redesign its Tropicana Pure Premium orange juice cartons as part of its new ad campaign. Said cartons make their aisle debut in January, minus the familiar straw-punctured orange and sporting a modernized depiction of—well, fresh-squeezed juice. Consumers revolt and demand the old packaging back. Two months and a reported US $35 million later, PepsiCo reverts back to the original Tropicana packaging, straw between its legs (and back on the carton).

There’s nothing unusual about a perennial product revisiting its packaging, labels or logos in an attempt to bring outdated aesthetics up to par with an enduring brand message…But if the brand is still enjoying hefty market share, why putter around with its packaging?

Tropicana has historically dominated number-two Minute Maid in the OJ category. “Sometimes [package redesign] has nothing to do with the business at all—it [comes] down to the new personnel working on the brand, hell-bent on making a mark on their career,” says Dyfed “Fred” Richards, executive creative director for global branding consultancy Interbrand, which also produces brandchannel. “It’s sometimes difficult for brand managers to demonstrate growth of a brand they’re being tasked to manage and grow. But a new package design associated with those changes demonstrates these changes.”

The agencies commissioned for a redesign may also share some of the blame for failed packaging overhauls. “Sadly, many [of these] companies enjoy the design process so much that design for design’s sake takes over, and all reason jumps out of the window for the benefit of a trend or effect they’ve wanted to try.”

With properly ascertained research and consumer feedback.. a brand can, and should, make an informed decision to redesign its packaging or logo.  “If a brand is in a leadership position, then it should be protecting and leveraging those key equities at all times in an effort to reinforce the reasons why it’s the market leader.” Richards says.

All parties involved need to carefully tread the redesign waters. “Understand the brand’s history,” Richards explains. “Talk to and listen to loyal consumers. This isn’t about sticking a pretty label on a box and hoping you win a design award. All the assets of the brand need careful evaluation to find out equity stretch points and equities that are sacrosanct to the consumer. More often than not, you’re not designing for your client, and certainly not for yourself—you’re designing for the consumer.”

Tropicana’s carton conundrum is a compelling story on a couple of fronts. First, there’s the juicy, schadenfreude-esque media obsession—the panned carton was one of the most blogged topics the week of February 23–27, behind only the machinations of President Obama’s new administration, according to the Project for Excellence in Journalism’s New Media Index.

But even more unusual has been the astonishing backlash from a usually silent, brand-loyal contingent, and PepsiCo’s eventual acquiescence to these vitamin C devotees. Feedback on the design, relayed to PepsiCo via letters, phone calls and e-mails, has ranged from deeming the cartons “ugly” to expressing outright confusion—some customers passed right by Tropicana cartons on store shelves, mistaking the new packaging for private-label offerings. “What’s evident from my experience and perspective is that key equities of the brand were thrown away for a generic offering, and consumers reacted,” Richards says.

So it’s back to the drawing board (or maybe not) for Tropicana. The old cartons are expected to reappear on store shelves this month. The only remnants of the US $35 million Arnell experiment will be the cute, orange-shaped plastic caps, which will be retained on cartons of low-calorie Trop50. The advertising campaign that’s currently in place will also continue.

Perhaps this could have all been avoided if PepsiCo had sought out real consumer input in the first place.

“When you go back and look at packaging through the ages, especially the power brands that have stood the test of time through decades of changes and consumer trends, they offer a unique insight of how to develop and manage key equities and remain relevant to the consumer of today and tomorrow.”

Edit by NRV

Full article: http://www.brandchannel.com/start1.asp?fa_id=469

* * * * *

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Click link => The Homa Files Blog

“Don’t touch my jug” … Tropicana cans new packaging

April 1, 2009

Excerpted from brandchannel.com, “Packaging: Lessons from Tropicana’s Fruitless Design” by Jennifer Gidman, March 16, 2009

* * * * *

It’s a revamp-gone-wrong tale that has already secured its place in the annals of packaging: PepsiCo retains Arnell Group to redesign its Tropicana Pure Premium orange juice cartons as part of its new ad campaign. Said cartons make their aisle debut in January, minus the familiar straw-punctured orange and sporting a modernized depiction of—well, fresh-squeezed juice. Consumers revolt and demand the old packaging back. Two months and a reported US $35 million later, PepsiCo reverts back to the original Tropicana packaging, straw between its legs (and back on the carton).

There’s nothing unusual about a perennial product revisiting its packaging, labels or logos in an attempt to bring outdated aesthetics up to par with an enduring brand message…But if the brand is still enjoying hefty market share, why putter around with its packaging?

Tropicana has historically dominated number-two Minute Maid in the OJ category. “Sometimes [package redesign] has nothing to do with the business at all—it [comes] down to the new personnel working on the brand, hell-bent on making a mark on their career,” says Dyfed “Fred” Richards, executive creative director for global branding consultancy Interbrand, which also produces brandchannel. “It’s sometimes difficult for brand managers to demonstrate growth of a brand they’re being tasked to manage and grow. But a new package design associated with those changes demonstrates these changes.”

The agencies commissioned for a redesign may also share some of the blame for failed packaging overhauls. “Sadly, many [of these] companies enjoy the design process so much that design for design’s sake takes over, and all reason jumps out of the window for the benefit of a trend or effect they’ve wanted to try.”

With properly ascertained research and consumer feedback.. a brand can, and should, make an informed decision to redesign its packaging or logo.  “If a brand is in a leadership position, then it should be protecting and leveraging those key equities at all times in an effort to reinforce the reasons why it’s the market leader.” Richards says.

All parties involved need to carefully tread the redesign waters. “Understand the brand’s history,” Richards explains. “Talk to and listen to loyal consumers. This isn’t about sticking a pretty label on a box and hoping you win a design award. All the assets of the brand need careful evaluation to find out equity stretch points and equities that are sacrosanct to the consumer. More often than not, you’re not designing for your client, and certainly not for yourself—you’re designing for the consumer.”

Tropicana’s carton conundrum is a compelling story on a couple of fronts. First, there’s the juicy, schadenfreude-esque media obsession—the panned carton was one of the most blogged topics the week of February 23–27, behind only the machinations of President Obama’s new administration, according to the Project for Excellence in Journalism’s New Media Index.

But even more unusual has been the astonishing backlash from a usually silent, brand-loyal contingent, and PepsiCo’s eventual acquiescence to these vitamin C devotees. Feedback on the design, relayed to PepsiCo via letters, phone calls and e-mails, has ranged from deeming the cartons “ugly” to expressing outright confusion—some customers passed right by Tropicana cartons on store shelves, mistaking the new packaging for private-label offerings. “What’s evident from my experience and perspective is that key equities of the brand were thrown away for a generic offering, and consumers reacted,” Richards says.

So it’s back to the drawing board (or maybe not) for Tropicana. The old cartons are expected to reappear on store shelves this month. The only remnants of the US $35 million Arnell experiment will be the cute, orange-shaped plastic caps, which will be retained on cartons of low-calorie Trop50. The advertising campaign that’s currently in place will also continue.

Perhaps this could have all been avoided if PepsiCo had sought out real consumer input in the first place.

“When you go back and look at packaging through the ages, especially the power brands that have stood the test of time through decades of changes and consumer trends, they offer a unique insight of how to develop and manage key equities and remain relevant to the consumer of today and tomorrow.”

Edit by NRV

Full article: http://www.brandchannel.com/start1.asp?fa_id=469

* * * * *

Want more from the Homa Files?
Click link => The Homa Files Blog